Baring to enter Indian realty in 6 months

Baring Private Equity Partners (BPEP), the global PE major, will begin investing in Indian real estate in the next six months, according to a top executive of the fund.

BPEP India was looking at investing from its $650 million Baring India Private Equity Fund III, said Varun Batra, partner, BPEP India.

BPEP India invested in information technology, healthcare and financial services sectors from its first two funds. The companies included business process outsourcing firm Mphasis and consumer goods company Jyothy Laboratories.

“FDI in real estate has been allowed for the past five years and the market has been through one learning cycle” said Batra, who was with Citigroup before joining Baring.

BPEP has been investing in India since 1998. The foray comes at a time consolidation is taking place in the real estate PE space.

Global PE firm Blackstone has taken over the management of $4 billion (Rs 18,000 crore) worth of BoA-Merril Lynch’s Asian real estate business, which includes $500 million (Rs 2,250 crore) Indian assets. Also, home-grown IL&FS Investment Managers has acquired realty fund manager Saffron Asset Advisors.

Apart from consolidation, overseas property funds have either pulled out or become dormant in the Indian property market in the aftermath of the global economic slowdown. For instance, investors such as Goldman Sachs, Landas Banki and Carval have pulled out from the Indian realty market, while others such as Morgan Stanley, AIG and Wachovia have become dormant.

Pranay Vakil, chairman of Knight Frank India, says larger funds make sense in the current market scenario. “You will never find a Rs 10,000-crore fund to sell out. Large funds can invest in small projects but smaller ones cannot put money in large projects,” he said.

Baring will look at residential and commercial properties in top seven cities. The ticket size would be Rs 100-Rs 250 crore, Mehra said.

Batra said BPEP would examine structures with preferred return and downside protection. Batra said a possible delay in disbursal of bank loans due to the recent loan scam might offer PE funds more investment opportunities.